Bids for Conseco Inc. moved up last week to 80 from the mid-70s. "It should trade in the low 80s," a market watcher predicted. Traders say the company is enjoying improved numbers on the heels of investor Warren Buffett's interest in the bonds. "People are just feeling more comfortable with the company," a dealer said. "Conseco's business is also improving." The Carmel, Ind.-based company specializes in life insurance. Stock prices plummeted last year after the company bought Green Tree Financial, but have since risen as news of Buffett's investment broke. A spokesman for Conseco wasn't aware of any loan trading, but added, "It doesn't surprise me, considering Berkshire Hathaway had been buying Conseco debt." He mentioned that the company's corporate bonds are now trading in the par range and that he expects the loan pieces to follow. "Our world started at the beginning of July in terms of building a new Conseco," the spokesman said. Changes included selling off five pieces of Green Tree, cutting 150 jobs and saving $150 million in annual expenses. The company plans to pay off $3 billion in debt over the next three years. "We're about two-thirds of the way through a substantial turnaround. The meeting of those debt payments is driving the value of our debt higher," he said.
This marks a turn around for the company that many dealers feared would default on its loan last spring. Bids fell as low as the 50s, following analysts' downgrade of the loan and concerns about cash flow (LMW, 5/1). In late October Conseco's troubles sparked dealers to meet to discuss whether restructuring of bonds and loans should be regarded as a credit event (LMW, 10/23). Conseco has a $299.510 million credit facility that breaks down into two tranches, according to Capital DATA Loanware. It is priced at 250 basis points over LIBOR. JP Morgan Chase and Bank of America lead the deal.